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Ofgem to be appointed as new heat networks regulator

Out-Law News | 10 Jan 2022 | 3:13 pm | 2 min. read

The UK government has announced plans to appoint Ofgem as the new heat networks regulator for Great Britain, as part of its efforts to transition to net zero carbon emissions by 2050.

A heat network is a system of insulated pipes that distribute heat from a central source, such as an industrial plant that produces heat as a by-product, to nearby homes and businesses.

The UK government has pledged to introduce legislation to regulate heat networks within the current parliamentary term. The legislation would also make Citizens Advice the sector’s consumer advocacy body. It said it would appoint the energy ombudsman as the independent ombudsman scheme for heat network consumers.

There are currently around 14,000 heat networks in Great Britain, serving approximately 500,000 consumers. Such networks are considered one of the most cost-effective ways of reducing household and commercial carbon emissions, with their efficiency increasing as they grow and connect. The independent Committee on Climate Change has estimated that, to meet its current carbon targets, around a fifth (18%) of the UK’s heat will need to come from heat networks by 2050.

Ofgem will be responsible for enforcing rules and guidance on pricing and quality of service, helping the new market grow, and increasing investor confidence as part of the government’s Heat Networks Market Framework. Separate regulations govern energy markets in Northern Ireland.

Jonathan Brearley, chief executive of Ofgem, said: “We welcome the government’s announcement that it will appoint Ofgem as the new heat networks regulator. Heat networks can play a key role in reducing carbon emissions from heating and helping to achieve the country’s climate goals.”

“We will work with the government to design a regulatory framework which attracts the investment needed while ensuring heat network customers, especially those in vulnerable circumstances, receive a fair price and reliable supply of heat for their homes as we make the transition to net zero,” he added.

The announcement comes as the government promised £19 million of investment in five new heat networks - two in Bristol, and three across Liverpool, London and Worthing. Collectively, the projects are expected to deliver heat to around 16,000 homes. The money forms part of the government’s £320 million Heat Networks Investment Project (HNIP) for England and Wales, which has awarded more than £250m since its launch in 2016.

Lord Callanan, minister for climate change, said: “Almost a third of all UK carbon emissions come from heating our homes and addressing this is a vital part of tackling pollution, driving down bills and reducing our reliance on costly fossil fuels.”

“Today’s announcement builds on our commitments made in the Heat and Buildings Strategy to regulate the UK’s heat networks, protect consumers, and create opportunities for green jobs and investment across the country,” he said. “This will allow thousands of households and businesses to feel the benefits of projects that are breaking new ground and making our villages, towns and cities cleaner places to live and work.”